New Zealand’s budget deficit was wider than earlier forecast in the fiscal year ended June 30 after a write down in the value of the state-owned rail company offset a rise in tax revenue.
The shortfall was NZ$9.24 billion ($7.6 billion) in the year through June, compared with an NZ$8.44 billion estimate in the May budget, according to government financial statements released today in Wellington. The deficit, measured before gains and losses on investments held by state-owned financial institutions, was half the NZ$18.4 billion gap a year earlier.
The figures showed New Zealand’s budget balance improved for the first time since 2006, reflecting a drop in costs associated with earthquakes in and around Christchurch in the past two years. Prime Minister John Key expects to return the budget to surplus by fiscal 2015 by reducing non-essential spending and cutting debt, arguing that tight fiscal discipline will protect the nation’s credit rating and take pressure off the central bank to raise interest rates.
“We’re running a balanced program to build a competitive economy, to reduce the unsustainable growth in government spending of the previous decade and to get back to surplus,” Finance Minister Bill English said in a statement. “In the uncertain global environment, it’s important that the government continues to focus on controlling its spending.”
Today’s statements don’t contain fiscal forecasts or revisions to the bond sales program, which will be published in an update in December.
The government announced in June that KiwiRail would be restructured and its assets valued on a commercial basis rather than on a public benefit basis. The decision resulted in a NZ$1.4 billion charge in the 2011-12 government accounts.
Excluding the charge, the deficit would have narrowed from the May forecast, the Treasury said.
The deficit included a NZ$1.9 billion cost related to the 2010-11 Christchurch quakes, including the state-owned disaster insurance company, infrastructure repairs and purchases of condemned homes.
Tax revenue rose by NZ$3.5 billion from the year earlier to NZ$55.1 billion, higher than the May projections amid improved company earnings, the Treasury Department said. Other revenue also exceeded forecasts on stronger sales by state-owned businesses and insurance proceeds from Christchurch earthquake claims by government departments.
Core government expenses fell by NZ$1.37 billion to NZ$69.1 billion, less than May projections, reflecting reduced costs in the government’s assistance to owners of weather-affected homes and lower costs of an emissions trading plan.
Net debt rose to 24.8 percent of gross domestic product as of June 30, from 20.3 percent a year earlier and less than the 25 percent projected in May, Treasury said.
Debt is likely to rise to 28.7 percent of GDP at its peak in 2014 and decline to less than 20 percent by the early 2020s, the government said in May.
The government plans to raise at least NZ$5 billion from the sale of shares in four state energy companies and Air New Zealand Ltd. Last month, the government deferred the sale of shares in Mighty River Power Ltd. until early 2013 because of the need to consult with Maori groups who claim rights to the water the company uses to power its turbines.
Share offers for Meridian Energy Ltd. and Genesis Power Ltd. are planned by early 2014.